Criticism of socialism
Socialism is unfeasible in this view because information cannot be aggregated by a central body and effectively used to formulate a plan for an entire economy, because doing so would result in distorted or absent price signals; this is known as the economic calculation problem.
The free market relies on the price mechanism, wherein people individually have the ability to decide how resources should be distributed based on their willingness to give money for specific goods or services.
The price conveys embedded information about the abundance of resources as well as their desirability (supply and demand) which in turn allows—on the basis of individual consensual decisions—corrections that prevent shortages and surpluses.
Mises and Hayek argued that this is the only possible solution and without the information provided by market prices socialism lacks a method to rationally allocate resources.
[15] Mises argued that a socialist system based upon a planned economy would not be able to allocate resources effectively due to the lack of price signals.
Mises projected that without a market economy there would be no functional price system which he held essential for achieving rational and efficient allocation of capital goods to their most productive uses.
[18][19] The anarcho-capitalist economist Hans-Hermann Hoppe argues that in the absence of prices for the means of production, there is no cost-accounting which would direct labor and resources to the most valuable uses.
[20] According to Tibor Machan, "[w]ithout a market in which allocations can be made in obedience to the law of supply and demand, it is difficult or impossible to funnel resources with respect to actual human preferences and goals".
[22] Proponents of chaos theory argue that it is impossible to make accurate long-term predictions for highly complex systems such as an economy.
[24] Leon Trotsky, a fierce proponent of decentralized economic planning, argued that centralized economic planning would be "insoluble without the daily experience of millions, without their critical review of their own collective experience, without their expression of their needs and demands and could not be carried out within the confines of the official sanctums" and "[e]ven if the Politburo consisted of seven universal geniuses, of seven Marxes, or seven Lenins, it will still be unable, all on its own, with all its creative imagination, to assert command over the economy of 170 million people".
[29][30] According to market abolitionists socialists, decentralized planning allows for a spontaneously self-regulating system of stock control (relying solely on calculation in kind) to come about and that in turn decisively overcomes the objections raised by the economic calculation argument that any large scale economy must necessarily resort to a system of market prices.
[32] As Hahnel explains: "Combined with a more democratic political system, and redone to closer approximate a best-case version, centrally planned economies no doubt would have performed better.
[32] Economist Milton Friedman argued that socialism, by which he meant state ownership over the means of production, impedes technological progress due to competition being stifled.
He noted that "we need only look to the United States to see where socialism fails" by observing that the "most technologically backward areas are those where government owns the means of production".
Friedman believed that this was one of the reasons for the United States patent system and copyright law, arguing: Socialism has proved no more efficient at home than abroad.
In a poorer and less socialist era, we produced a nationwide network of roads and bridges and subway systems that were the envy of the world.
[33] In The Principles of Political Economy (1848), John Stuart Mill wrote: It is the common error of Socialists to overlook the natural indolence of mankind; their tendency to be passive, to be the slaves of habit, to persist indefinitely in a course once chosen.
[39] In The Road to Serfdom, Friedrich Hayek argued that the more even distribution of wealth through the nationalization of the means of production cannot be achieved without a loss of political, economic, and human rights.
[41] Peter Self criticizes the traditional socialist planned economy and argues against pursuing "extreme equality" because he believes it requires "strong coercion" and does not allow for "reasonable recognition [for] different individual needs, tastes (for work or leisure) and talents".
Mark J. Perry of the conservative American Enterprise Institute (AEI) argued that socialism means giving up freedom for more security.
[7] In his campaign against Labour candidate Clement Attlee in the 1945 general election, Winston Churchill claimed that socialism requires totalitarian methods, including a political police, to achieve its goals.
[47][50] Nathan J. Robinson, editor-in-chief of the left-wing progressive Current Affairs magazine, has defended socialism from criticism, arguing of "a libertarian socialist tradition that has always been strongly opposed to the authoritarian 'socialism' that many governments have espoused".
